Farm selling pressures grain markets
By: Ray Grabanski, Agweek
Wheat: higher dollar
The wheat markets had losses of 15 to 25 cents last week. All of the grain markets experienced a “risk-off” week, with noncommercial traders pulling money out of the grains in favor of other markets. The sharply higher dollar pressured wheat, as well.
The wheat market started the week Feb. 11 with losses as pressure spilled over from steep losses in the corn and soybean markets. Fundamentally, wheat has some items to look forward to, like poor wheat conditions in the Southern Plains and production issues in three of the five major exporting countries. A negative fundamental item came from the release of the U.S. Department of Agriculture’s ag forum projections, estimating higher wheat acreage for 2013. This seems a stretch. The markets continued to trade lower Feb. 12, with forecasts for snow and rain in the southwest portions of the Winter Wheat Belt.
Chicago wheat posted a new seven-month low the morning of Feb. 13 before buying interest stepped in to stage a small recovery. The market was heavily oversold and due for a correction. Demand news was starting to creep into the wheat industry, with cash basis strengthening. The big news around midday was a rumor that Brazil was shopping for U.S. wheat. While unconfirmed, it was enough of a spark to make wheat the leader of the grain markets for the day.
Light losses returned to the wheat markets on Feb. 14. Export sales were better last week than they have been for some time, but we will need to see this trend sustained to have a chance of meeting USDA projections. There has been an uptick in interest from wheat buyers around the world, but the sharp gains in the dollar index limited any talk of future export optimism. Parts of the Oklahoma and Texas panhandles received wet snow, while other parts remain dry. Wheat markets had light gains at midday on Feb. 15, as traders took some profits ahead of the three-day weekend.
USDA’s export inspections pace for wheat was estimated at 22.45 million bushels for the week ending Feb. 8. This brings the year-to-date export shipments pace for wheat to 622.5 million bushels, compared with 693.6 million for last year at this time. With 16 weeks left in the marketing year, wheat shipments need to average 26.7 million bushels to make USDA expectations of 1.05 billion. USDA reported export sales of 24.3 million bushels, above the 16.4 million needed to keep pace with projections. Shipments of 21.2 million bushels were below the 28.2 million needed.
Corn: larger South American crop
The corn market was down 15 cents last week in old crop, while new crop was only down 2 cents. Pressure came from estimates of a record corn crop in Brazil and large production estimates for the 2013 U.S. crop, as well as the very slow pace for exports of our 2012 corn crop.
The corn market traded with red ink Feb. 11 with pressure from the Feb. 8 bearish USDA report. There was some rain in central Brazil and central Argentina over the weekend. Traders were also surprised there was no adjustment in corn used for ethanol. Twenty of the 211 U.S. ethanol plants have shut down this winter and five of those were idled in January. USDA also released its baseline acreage and production estimates for 2013 to ’14 and estimated corn planted acreage at 96 million acres versus 97.2 million in 2012. Production was estimated at 14.44 billion bushels versus 10.78 in 2012 and 2013. Ending stocks were pegged at 2.07 billion bushels versus 632 million in 2012 to ’13.
The selling pressure continued on Feb. 12 and 13. The March contract closed below $7 in a heavy volume day on Feb. 12. Trade was able to poke back above that level on Feb. 13 before slipping lower again. Noncommercial traders were busy pulling long positions out of the grain markets last week in favor of other markets. Talk that four ethanol plants will reopen was encouraging.
The corn market was quieter on Feb. 14 and 15, with light losses on Feb. 14 and light gains at midday on Feb. 15. There was support from short-covering and profit taking on Feb. 15, ahead of the three-day weekend.
Ethanol production for the week ending Feb. 8 averaged 789,000 barrels per day. Total ethanol production for the week was 5.5 million barrels. Corn used in production the week ending Feb. 8 was estimated at 82.9 million bushels and needs to average 87.4 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. Stocks as of Feb. 8 were 19.5 million barrels, which is down 3 percent versus the previous week and down 9.3 percent from last year.
USDA’s export inspection report was bearish for corn. There were 14.5 million bushels shipped. Shipments needed each week to hit the USDA export estimate are 19.5 million bushels. The export sales report for corn was at 8.9 million bushels, below the 12.1 million needed to meet USDA’s projection of 950 million. Total shipments last week were at 15.4 million bushels, below the 19.3 million needed for the 2012 to ’13 marketing year.
Soybeans: demand quiet
during Chinese holiday
March soybeans were down 30 cents last week while November 2013 soybeans were 18 cents lower. Improving South American weather pressured the market, as did a lull in U.S. exports.
Soybeans opened the session lower on the morning of Feb. 11 and extended session losses. Pressure spilled over from Feb. 8, as many traders were somewhat surprised by the negative aspect to the world estimates. Additional selling was tied to improving weather conditions in South America, especially Argentina. Decent rains are expected to move through a majority of the major soybean-growing regions this week. Once the selling pressure picked up, negative technical signals were triggered, which added to the selling pressure, taking soybeans to three-week lows by the close.
Results were somewhat mixed on Feb. 12 and 13 as old crop was lower Feb. 12 and higher Feb. 13, while new crop was higher Feb. 12 and lower Feb. 13. As of close Feb. 13, the March contract had fallen nearly 80 cents from the previous week’s high of $14.98. Short covering provided support to nearby contracts on Feb. 13, while strong production prospects in South America weighed on new-crop contracts.
March soybeans finished the session Feb. 14 with moderate losses. Improved South American weather forecasts continue to weigh on the market as lower temperatures limit the stress on crops in Argentina. Feb. 14 export data was disappointing, as some cancellations were reported. The National Oilseed Processors Association crush was reported at 159.5 million bushels, lower than had been expected. Trade Feb. 15 brought some light gains as traders took profits ahead of the three-day weekend.
USDA reported soybean export inspections pace for the week ending Feb. 8 at 30.1 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.038 billion bushels, compared with 797.4 million for last year at this time. Soybean export sales pace for the week ending Feb. 8 was estimated at 35.9 million bushels, bringing this year’s total to 1.25 billion, compared with 1 billion last year at this time.
USDA estimated barley export inspections pace for the week ending Feb. 8 at 12,000 bushels, all going to Mexico. This brings the year-to-date export inspections estimate for barley to 5.6 million bushels, compared with 5.77 million last year. USDA reported export sales and shipments of 8,000 bushels going to Taiwan. Feb. 14 cash feed barley bids in Minneapolis were at $5.15 per bushels with malting barley bids at $7.
USDA estimated durum export inspections pace for the week ending Feb. 8 at 101,000 bushels. USDA reported export cancellations of 800,000 bushels, putting the total sales so far at 16.8 million, up from 15.1 million at this time last year. Shipments of 100,000 bushels were also reported. Cash bids for milling quality durum on Feb. 14 were at $8 per bushel in Berthold, N.D., and $7.85 in Dickinson, N.D.
Canola futures on the Winnipeg, Manitoba, exchange lost around $6 (Canadian) per ton for last week. After hitting $650 (Canadian) per ton Feb. 8, the canola market had steep losses for the first half of the week before recovering somewhat to be trading around $630 (Canadian) per ton. Weakening cash basis signaled that the futures rally may have run its course the week ending Feb. 8, but the market did not forget that stocks are still tight, leading to a recovery by the end of last week. Cash canola bids in Velva, N.D., were at $28.36 per hundredweight on Feb. 14.
USDA reported export sales of 16.6 trillion metric tons of soybean oil, with shipments of 33.1 trillion metric tons. Total sales so far this year are at 775.4 trillion metric tons, way up from 242.7 trillion last year. Cash bids for NuSun sunflowers in Fargo, N.D., were at $22.50 per hundredweight on Feb. 14.